lo  . 7. 

Y IS  I if<L. 

MJT\  r| 

(Circular  No.  7.) 

COMMONWEALTH  OF 


fAy 


l 


VIRGINIA 


STATE  TAX  BOARD 


H.  C.  Stuart,  Governor , 
Chairman . 

C.  Lee  Moore,  Auditor  of 
Public  Accounts,  Secretary. 

C.  B.  Garnett,  Chairman  of  the 
Corporation  Commission. 


Oscar  L.  Shewmake,  Counsel 
and  Executive  Assistant. 
Horace  W.  Hall, 

Second  Assistant. 

W.  C.  Williams, 

Clerk  to  the  Board. 


Richmond,  Va.,  May  2,  1917. 

Published  for  the  Information  of  Tax  Officers. 


The  State  Tax  Board  submits  herewith  a digest  of  a number  of 
the  opinions  on  questions  involving  the  construction  and  applica- 
tion of  the  tax  laws  of  Virginia  which  have  been  rendered  by  the 
Counsel  and  Executive  Assistant  to  the  State  Tax  Board  since  June 
14,  1916.  This  digest  has  been  made  only  of  those  opinions  bearing 
upon  tax  questions  of  general  interest,  and  represents  by  no  means 
all  of  the  work  of  this  nature  done  by  this  office.  The  purpose  of 
the  State  Tax  Board  in  publishing  this  digest  is  to  inform  and  assist 
the  tax  officers  of  the  State  in  the  performance  of  their  various 
duties  and  to  promote  uniformity  of  procedure  under  the  laws  which 
compose  the  revenue  system  of  the  State. 

These  opinions  have  been  prepared  in  response  to  inquiries 
by  Examiners  of  Records,  Commissioners  of  Revenue,  members  of 
Local  Boards  of  Review  and  other  tax  officers,  and  copies  have  been 
preserved  and  bound  in  a volume  kept  in  this  office.  Should  any 
tax  officer  desire  a complete  copy  of  any  opinion  found  digested 
here  the  same  may  be  had  upon  application. 

Respectfully  submitted, 

STATE  TAX  BOARD, 

H.  C.  Stuart,  Chairman. 

C.  Lee  Moore,  Secretary. 


> I 


INDEX. 

References  are  to  Numbers. 


A. 

Administrator,  fund  not  taxable  to  where  life  estate  is  given  to 

one  with  remainder  over 68 

personally  liable  for  taxes  when  he  neglects  to  retain  same 

out  of  estate 70 

Administrator  or  executor,  estate  closed  by,  omitted  taxes 66 

Agricultural  productions,  in  hands  of  purchaser  or  producer,  how 

taxed 61 

Ancillary  executor,  extent  of  liability  for  taxes 59 

Appeals,  right  of  taxpayer  to.  . .x 20 

Assessment,  capital  of  corporations,  what  jurisdiction 17 

Assignment  of  note,  secured  by  deed  of  trust,  to  whom  taxed.  ...  62 
Attorneys,  loans  for  clients,  Local  Boards  of  Review  can  call  for 

disclosures 34 

Automobile  dealers,  on  purchases 53 

B. 

Bailment,  grain  received  as  deposit  and  mingled  with  that  pur- 
chased by  flour  manufacturer  not  such 72 

Banks,  checking  accounts 9 

that  refuse  to  give  information  to  examiners  of  records, 

how  proceeded  against 69 

Barrels  and  ice,  peddler  of 54 

Beginning  business,  capital,  first  class  under  gross  assets 28 

purchases  of  merchants,  how  estimated 15 

Boards  of  Review,  information  that  can  be  required  as  to  bor- 
rowed money  67 

Boarding  houses,  summer,  license 4 

Bonds,  fiduciary  money  not  taxed  as  such 57 

municipal 3q 


4 


The  State  Tax  Board. 


of  defunct  corporations 18 

U.  S.  not  taxable  as  income 31 

Branch  establishments  out  of  State,  Virginia  corporation,  in- 
come of  12 

Building  association,  that  borrows  money,  can  be  required  to  fur- 
nish information  as  to  loans 67 

Building  Contractor,  capital,  who  pays  license  tax . ...  50 

Building  and  Loan  Association,  income  tax 58 

C. 

Capital,  building  contractor,  who  pays  license  tax 50 

computing,  deductions  in  excess  of  assets 51 

cut  timber  as  part  thereof 39-46 

dairy  farm  and  products 61 

deducting  amount  owing  on  purchases 41 

grain  received  as  deposit  and  mingled  with  that  purchased 

by  flour  manufacturer  taxable  as  such 72 

money  deposited  with  trustees  as  such 49 

persons  beginning  business,  first  class  under  gross  assets.  . 28 

silk  manufacturing  corporation 47 

situs  of  for  taxation 29 

surplus  of  fishing  corporations 21 

tobacco  in  warehouses,  how  returned 16 

rule  as  to  excess 45 

where  assessable 17 

Capitation  Taxes,  delinquent 10 

of  veterans, 52 

Cattle,  farm  stocked  with  under  will,  intangible  property 42 

Clothing  Houses,  orders  sent  out  of  State 48 

Contractor,  building,  who  pays  license  tax,  taxability  of  capital . . 50 

Corporations,  income  tax,  deductions  and  exemptions 22 

income,  doing  all  of  business  out  of  State 23 

income,  doing  business  out  of  State,  meetings  held  in 

Virginia 24 

situs  of  capital  for  taxation 29-40 

situs  of  income  for  taxation 37 


Digest  of  Opinions. 


value  of  stock  held  by 56 

Correction  of  assessment,  omitted  taxes,  real  estate 55 

County  Taxes  for  Prior  Years,  right  to 14 

Cut  Timber,  how  assessed 39-46 


D. 


Dairy  Farm,  proceeds  taxed  as  capital 61 

Decrease  in  assessment,  time  within  which  Local  Board  may  act.  63 

Declaration,  principal  office,  corporation,  conclusive 17 

Deductions  to  Corporations,  capital,  money  borrowed  to  pay  bill 

not  allowed 41 

in  excess  of  assets,  capital 51 

income  tax 1-22 

Deduction  from  income,  shrinkage  in  value  of  real  estate 44 

Defunct  Corporations,  omitted  tax  on  bonds 18 

Deposit,  of  grain  received  by  flour  manufacturer  and  mingled 

with  that  purchased,  taxable  as  capital 72 

Depreciation,  in  value  of  real  estate  not  deducted  from  income . . 44 
Dividends,  from  stock  in  foreign  corporations,  taxable  as  income.  6 

Domicile,  for  purpose  of  taxation 33 

Double  assessment,  relief  from 39 

Drugs,  held  by  physician 32 

Drug  Store,  selling  soda  water,  etc.,  how  taxed 65 


E. 

Estates,  stock  owned  by 59 

Erroneous  Assessment,  omitted  taxes,  time  allowed  for  appeal.  . . 20 
Examiner  of  Records,  how  to  proceed  when  bank  refuses  to  fur- 
nish information  69 

shall  report  judgments ' 19 

Exemptions  to  Corporations,  income  tax 1-22 

Executor,  farm  stocked  with  cattle  under  will,  intangible  prop- 
erty   42 

Executor  or  Administrator,  estate  closed  by,  omitted  taxes 66 

Excess  of  Deductions  over  Assets,  in  computing  capital 45-51 


6 


The  State  Tax  Board. 


F. 


Farmers’  Unions,  co-operative 43 

Felled  Timber,  how  assessed,  land  or  capital. 46 

Fiduciary,  where  fund  is  left  as  life  estate  to  one  with  remainder 

over,  taxability 68 

Fiduciaries,  funds  in  the  hands  of,  distribution  prior  to  Febru- 
ary 1st 64 

Fiduciary,  money  in  hands,  taxed  as  such 57 

Fine,  against  bank  for  refusing  to  furnish  information  to  exami- 
ners of  records,  how  collected 69 

Firms  and  Partnerships,  income  tax,  returns 2 

Fishing  corporations,  surplus  of  as  capital 21 

Flour  manufacturer,  grain  received  as  deposit  and  mingled  with 

that  purchased,  taxable  as  capital 72 

Foreign  Corporation,  capital  ...... 47 

hides  used  by  Virginia  corporation,  to  whom  taxable 38 

situs  of  capital  for  taxation 29 

stock  of 5 

Funds  in  Hands  of  Fiduciaries,  distribution  made  prior  to  Feb- 
ruary 1st 64 


G. 


Gasoline,  sale  of 25-26 

Gifts,  of  money  returned  as  income . . . . : 27 

of  U.  S.  bonds  not  taxable  as  income 31 

Guardian,  who  holds  money  in  bank,  how  assessed 57 


H. 

Hides,  owned  by  foreign  corporation,  used  by  Virginia  corpo- 
ration   38 


Digest  of  Opinions. 


7 


I. 

Ice,  license  required  of  manufacturer  that  sells  to  largest  stock- 
holder   9 

Ice  and  Barrels,  peddler  of 54 

Income,  branch  establishments  out  of  Virginia 12 

building  and  loan  associations 58 

corporation  doing  business  out  of  State  holding  meetings 

in  Virginia  24 

deduction  for  loss  in  sale  of  real  estate 44 

derived  from  sale  of  real  estate,  not  such 60 

dividends  from  stock  of  foreign  corporations 6 

exemptions  to  corporations  1-22 

firms  and  co-partnerships . 2 

gifts  of  money  as  such 27 

gifts  of  U.  S.  bonds  not  such 31 

judiciary  of  cities 13 

State  and  national  banks 35 

situs  for  taxation,  corporation 37 

Virginia  corporations  doing  business  out  of  Virginia 23 

Increase,  in  Value  of  Land,  how  assessed 60 

in  assessment,  time  within  which  Local  Board  may  act.  . . 63 
Information,  that  can  be  required  by  Board  of  Review  of  Build- 
ing Association  67 

how  bank  proceeded  against  when  refuses  to  furnish  Ex- 
aminers of  Records 69 

Intangible  property,  farm  stocked  with  grazing  cattle  under  will.  42 
Intent  to  change  domicile 33 

J. 

Judgments,  taxation  of 19 

Judiciary,  income  from  salaries 13 

Jurisdiction  for  Taxation,  ancillary  executor 59 

/ 


The  State  Tax  Board. 


6 


L. 

Land,  increase  in  value  of  how  assessed 60 

Life  estate  fund,  does  not  come  under  control  of  fiduciary  when 

remainder  over  68 

Liability  (personal),  of  administrator  for  taxes  who  does  not  re- 
tain funds  out  of  estate 70 

License,  automobile  dealer  on  basis  of  purchases 53 

beginner  in  business,  merchant’s  purchases  how  estimated,  15 

boarding  houses 3 

farmers’  unions  43 

ice  manufacturer  that  sells  to  largest  stockholder 8 

oil  and  gasoline,  peddler  or  merchant 25-26 

merchant  who  discounts  notes  not  private  banker 36 

merchant,  local  representative  taking  orders  for  suits.  ...  48 

merchant,  purchases  no  local  stock 11 

peddler,  steamboat  captain  who  sells  barrels  and  ice 54 

lodging  furnished  to  travelers 3 

storage  tanks  7 

warehouse,  storage  tanks 7 

Local  Board  of  Review,  can  call  for  disclosures 34 

time  within  which  assessment  may  be  increased  or  de- 
creased   63 

information  that  can  be  required  of  building  association.  . 67 
Lumber,  how  assessed  39 

M. 

Market  value,  of  stock  held 56 

Merchants,  automobile  dealers  53 

beginner  in  business,  purchases,  how  estimated 15 

not  considered  private  bankers  who  renew  notes 36 

sale  of  oil  and  gasoline 25-26 

sending  orders  out  of  State 48 

Merchant’s  license,  purchases,  no  local  stock  kept 11 

drug  store  that  sells  soda  water,  etc 65 

tax  omitted,  penalty  of  5%  to  be  imposed 71 


Digest  of  Opinions. 


9 


Milk,  proceeds  from  sale  of,  taxed  as  capital 61 

Money,  gift  of,  taxed  as  income 27 

loaned  by  attorneys  for  clients,  Local  Board  of  Review  can 

call  for  disclosure  34 

remainder  in  after  life  estate  not  taxable  to  administrator . 68 

Money  in  bank,  as  checking  account 9 

held  by  guardian,  how  assessed 57 

Money  deposited  with  trustees,  capital 49 

Municipal  Bonds,  taxation  of 30 

N. 

National  Banks,  not  subject  to  income  tax 35 

Notes,  taxed  in  hands  of  holder  on  February  1st 62 

O. 

Oil  Company,  peddler  or  merchant 25 

Omitted  Property,  bonds  of  defunct  corporation 18 

Omitted  Taxes,  estate  closed  by  administrator  or  executor 66 

right  of  appeal,  time  allowed 20 

right  of  county  to 14 

stock,  holding  corporation  56 

Omitted  merchant’s  license  tax,  penalty  of  5%  to  be  imposed.  . . .71 
Omitted  real  estate  55 

P. 

Partnership,  income  tax,  returns 2 

Peddlers,  ice  and  barrels 54 

oil  and  gasoline  25-26 

Penalty,  of  5%  to  be  imposed  on  omitted  merchant’s  license  tax. . 71 
Personal  liability  of  Administrator,  who  does  not  retain  fund  out 

of  estate  to  pay  taxes 70 

Physician,  drugs  in  possession  of 32 

Presumption  of  payment,  capitation  taxes 10 

Principal  Office,  situs  of  for  taxation  of  corporation 37-40 


10 


The  State  Tax  Board. 


corporation,  declaration  conclusive  17 

Private  entertainment,  house  of,  license 3 

Private  Banker,  merchant  not  such 36 

Producer,  agricultural  productions  in  hands  of,  how  taxed 61 

Purchaser,  agricultural  productions  in  hands  of,  how  taxed 61 

Purchases,  beginner  in  business 15 

R. 

Raw  materials,  owned  by  foreign  corporation,  capital 47 

Real  estate,  income  from  sale  of 60 

omitted  from  books  55 

shrinkage  in  value,  no  deduction  from  income 44 

Remainder,  in  fund  after  life  estate  not  taxed  to  administrator.  . 68 
Residence,  intent  to  change,  tax  domicile ' 33 

S. 

Salaries,  judiciary,  liability  for  income  tax 13 

Shrinkage  in  Value,  real  estate,  not  deducted  from  income 44 

Soda  Water,  etc.,  sold  by  drug  store,  how  taxed 65 

Silk,  capital  of  corporation  manufacturing 47 

Situs  for  taxation,  corporation,  income  tax 37 

corporation,  capital,  etc 40 

State  and  National  Banks,  not  subject  to  income  tax 35 

Stock,  foreign  corporation,  income  tax..... 6 

market  value  thereof 56 

of  foreign  corporations  5 

owned  by  estate,  ancillary  executor 59 

Stockholder,  buys  ice  and  resells,  license 8 

Storage  Tanks,  license  for 7 

T. 

Timber,  when  classified  as  capital 39-46 

Time,  within  which  the  Local  Board  of  Review  may  increase  or 

decrease  assessment  63 


Digest  of  Opinions.  II 

Tobacco,  assessed  as  capital 16 

Town  Bonds,  taxation  of 30 

Trustee,  who  holds  money  as  guaranty 49 

U. 

Unions,  farmers  local  co-operative 43 

United  States  Bonds,  gift  of  not  taxable  as  income 31 

V. 

Veterans,  capitation  taxes  of 52 

W. 

Warehouse,  license  for  storage  tanks 7 

Will,  farm  stocked  with  cattle  under,  intangible  property 42 


t 


DIGEST  OF  OPINIONS 


1. 


Income  tax — Exemptions  to  Corporations — Deductions. 

Does  the  new  income  tax  law  approved  March  22,  1916,  pro- 
vide any  exemptions  for  corporations  such  as  are  provided  for 
individuals  ? 

Held: 

No  exemptions  are  allowed  corporations  such  as  are  allowed  in- 
dividuals, for  instance  income  up  to  $1,200,  the  exemption  to  hus- 
band and  wife,  and  for  each  unmarried  or  legally  adopted  child. 

In  arriving  at  net  income  both  corporations  and  individuals 
are  allowed  the  deductions  found  on  page  23,  Virginia  Tax  Laws. 

2. 

Income  tax — Firms  and  Partnerships — Returns. 

Should  firms  and  co-partnerships  make  the  same  returns  of 
income  as  provided  for  corporations? 

Held: 

Firms  and  partnerships  as  entities  are  not  required  to  make 
returns  of  income,  but  the  individual  members  of  firms  and  part- 
nerships are  required  to  make  returns  of  income. 

3. 

License  Tax — Furnishing  lodging  to  travelers  occasionally. 

A and  B living  in  different  sections  of  the  country  in  which 
there  are  no  hotels,  and  occasionally  drummers  or  traveling  men 
are  forced  to  spend  the  night  or  to  take  a meal,  say  five  or  six 
times  during  the  year.  Should  A and  B be  required  to  take  out  a 
license  for  running  a house  of  private  entertainment? 

Held: 

If  A and  B charge  compensation  for  furnishing  lodging  and 
diet  to  travelers  or  sojourners,  they  should  be  required  to  take  out 


4-8 


The  State  Tax  Board. 


a license,  even  though  the  furnishing  of  lodging  or  diet  be  occa- 
sional and  not  regular.  (Secs.  93,  94  and  95,  Virginia  Tax  Laws.) 

4. 

License  Tax — Summer  Boarding  house — One  who  keeps  boarders 
occasionally. 

Under  what  sections  is  a person  who  keeps  a summer  boarding 
house  taxed? 

Held: 

Under  sections  93,  94  and  95  of  Virginia  Tax  Laws  only  quasi- 
public houses  are  taxed,  where  boarders  are  habitually  kept  and 
transients  received,  and  that  are  held  out  as  places  of  that  kind. 
One  who  only  keeps  boarders  occasionally,  and  who  does  not  re- 
ceive transients  is  not  taxed. 


5. 

Taxation  of  Stock  in  hands  of  resident  of  Virginia — West  Virginia 
corporation  doing  business  in  Virginia. 

A resident  of  Virginia  is  the  holder  of  stock  in  a West  Virginia 
corporation,  which  pays  no  franchise  tax  in  Virginia,  but  as  that 
corporation  does  a part  of  its  business  in  Virginia,  it  pays  to  the 
State  of  Virginia  a tax  on  its  capital  used  in  such  business.  Is  the 
resident  of  Virginia  liable  for  taxation  on  the  stock  in  said  West 
Virginia  corporation? 

Held: 

A resident  of  Virginia  who  holds  stock  in  West  Virginia  cor- 
poration is  liable  for  taxation  on  same  under  Schedule  “C”,  sec. 
8,  sub-sec.  5,  Virginia  Tax  Laws. 

6. 

Income  tax — resident  of  Virginia — stock — West  Virginia  corpora- 
tion— Doing  business  in  Virginia. 

A resident  of  Virginia  is  the  holder  of  stock  in  a West  Virginia 
corporation,  which  pays  no  franchise  tax  in  Virginia,  but  as  that 


Digest  of  Opinions. 


4-8 


corporation  does  a part  of  its  business  in  Virginia,  it  pays  to  the 
State  of  Virginia  a tax  on  its  capital  used  in  such  business.  Are 
his  dividends  from  such  stock  to  be  returned  as  a part  of  his  in- 
come subject  to  taxation  in  Virginia? 

Held: 

The  dividends  from  such  stock  are  taxable  as  income,  and  are 
not  within  the  deductions  in  the  income  tax  law.  This  opinioon  is 
based  on  law  of  1916,  but  the  law  has  been  the  same  since  1903. 

7. 

Warehouse  License— Storage  Tanks  of  Paper  Mills — Liquid  Stored 
for  Benefit  of  Purchasers. 

A paper  mill  has  built  some  storage  tanks  in  which  it  proposes 
to  store  some  of  the  liquid  materials  made  at  the  plant.  The  idea 
is  that  it  will  sell  some  of  this  material  and  store  it  for  the  benefit 
of  the  purchaser,  issuing  to  him  a storage  receipt  as  evidence  of 
the  purchaser’s  title.  The  question  arises  as  to  whether  a general 
warehouse  license  is  required,  and,  if  so,  how  the  amount  to  be 
paid  for  such  a license  is  to  be  computed. 

Held: 

This  company  is  subject  to  a license  tax  of  $10.00  for  every 
lot  or  yard  containing  one  or  more  storage  tanks,  if  the  compensa- 
tion to  the  owner  is  $50.00  or  more  per  annum,  under  sections  131 
and  132  of  the  Tax  Bill. 


8 . 

License — Manufacturer  of  Ice  that  sells  all  product  to  largest 
Stockholder  who  resells. 

A manufacturer  of  ice  sells  all  of  its  products  to  one  man,  wrho 
is  the  largest  stockholder  in  the  manufacturing  company,  who  in 
turn  sells  the  ice  from  wagons.  Is  a license  required  of  this  manu- 
facturer ? 

Held: 

This  manufacturer  is  subject  to  the  same  license  as  if  it 
sold  ice  to  any  one  from  its  wagons,  because  a corporation  and 


9-13 


The  State  Tax  Board. 


its  members  are  separate  legal  entities,  and  it  makes  no  difference 
if  the  buyer  is  the  largest  stockholder  in  the  corporation. 

9. 

Money  in  Bank — Checking  Account — Taxable  as  capital  or  money. 

Is  money  in  bank  used  as  a checking  account  taxable? 

Held: 

Money  on  deposit  with  a bank  other  than  money  used  or  em- 
ployed in  any  trade  or  business  not  otherwise  taxed,  is  taxable 
by  the  State  as  money.  If  money  is  used  by  a manufacturer,  or  in 
any  other  business  subject  under  the  laws  of  the  State  of  Virginia 
to  a tax  on  capital,  it  is  taxable  as  capital. 

10. 

Capitation  tax — Presumption  of  payment — not  returned  delinquent 
or  marked  paid. 

A county  treasurer  finds  that  a man  has  paid  his  capitation 
taxes  for  1913  and  1915,  but  that  he  is  neither  returned  delinquent 
for  1914  or  marked  paid  on  the  1914  voting  list.  Question  is  as  to 
whether  the  treasurer  should  make  any  presumption  as  to  whether 
or  not  the  man  has  paid  his  capitation  taxes,  in  making  out  the 
voting  list. 

Held: 

The  list  made  by  a treasurer  is  required  to  be  verified  by  his 
oath.  Before  taking  oath  to  a list  upon  the  facts  which  are  given 
above,  more  detailed  information  should  be  gained  from  the  tax- 
payer if  possible.  It  would  be  violative  of  the  treasurer’s  oath  to 
make  any  presumption  one  way  or  the  other. 

11. 

Merchant’s  License — purchases — No  stock  of  goods  kept  in  local 

house. 

All  goods  of  a company  for  a certain  territory  pass  through 
local  city  house,  but  no  stock  of  goods  is  kept  on  hand  to  fill  orders 


Digest  of  Opinions. 


9-13 


in  local  store.  When  orders  are  taken  the  goods  are  in  New  York, 
and  the  manager  of  the  local  store  orders  goods  from  New  York  to 
anticipate  the  receipt  of  orders  from  agents  in  this  territory.  In 
other  words,  there  is  a constantly  changing  stock  of  goods  in  the 
local  store  sent  in  response  to  orders  from  this  territory,  but  this 
constantly  changing  stock  of  goods  is  carefully  not  sent  out  to  any 
orders  taken  while  the  goods  are  in  the  local  house.  Are  these 
goods  taxable? 

Held: 

These  goods  are  taxable,  and  the  Commissioner  of  the  Revenue 
should  request  the  company  to  report  the  value  of  all  goods  shipped 
into  the  local  house  for  distribution  in  the  territory,  and  if  the 
company  refuses  to  give  such  a report,  the  Commissioner  of  the 
Revenue  should  assess  them  upon  the  best  information  possible., 

12. 

Income  tax— Virginia  Corporation — Earnings  of  branch  out  of  State. 

Does  the  income  tax  law,  passed  by  the  Legislature  in  1916, 
require  a Virginia  Corporation,  having  an  establishment  in  Vir- 
ginia and  a branch  establishment  out  of  the  State,  to  pay  an  in- 
come tax  upon  the  earnings  of  the  business  done  by  the  establish- 
ment out  of  Virginia? 

Held: 

The  law  does  not  exempt  from  taxation  the  income  derived 
from  the  branch  outside  of  Virginia. 

13. 

Income  tax— Salaries  judiciary— derived  from  State. 

Is  the  income  derived  by  the  judiciary  of  a city  from  the  State 
on  account  of  salaries,  taxable  under  the  income  tax  law  ? 

Held: 

These  salaries  are  subject  to  taxation  under  the  income  tax  law. 


14-18 


The  State  Tax  Board. 


14. 

Omitted  taxes — county  taxes  prior  to  1912. 

In  1915  the  Commissioner  of  the  Revenue  for  a certain  county 
assessed  a party  with  omitted  taxes,  both  State  and  local,  for  the 
years  1910,  1911,  1912,  1913  and  1914.  These  taxes  have  not  been 
paid  and  the  party  is  willing  to  pay  said  taxes,  but  claims  that  the 
county  taxes  for  the  years  1912,  1913  and  1914  are  all  that  can  be 
required  under  the  amendment  to  section  508  of  the  Code,  found 
in  Virginia  Tax  Laws,  1916,  page  158.  The  assessment  was  made 
under  the  old  law,  that  is  prior  to  the  General  Assembly  of  1916. 
Is  this  assessment  affected  by  the  amendment,  and  has  the  county 
a right  to  the  taxes  assessed  against  this  property  for  the  years  1910 
and  1911? 

Held: 

The  express  terms  of  the  law  of  1916  prevent  the  collection  of 
county  taxes  for  years  prior  to  1912,  whether  assessed  or  not. 

15. 

Purchases  of  Merchants — how  estimated — beginning  business. 

How  shall  a Commissioner  estimate  the  purchases  of  merchants  * 
who  began  business  in  the  middle  of  the  year  1915?  In  this  case  a 
Commissioner  fixed  the  tax  on  purchases  for  six  months,  the  mer- 
chant only  having  purchased  goods  for  six  months  of  the  year  1915. 
Held: 

An  estimate  should  be  made  of  the  goods,  wares  and  merchan- 
dise which  would  be  offered  for  sale  during  the  year.  This  estimate 
can  be  arrived  at  by  taking  the  amount  of  goods  bought  to  com- 
mence with,  together  with  all  purchases  up  to  the  time  when  the 
assessment  of  the  merchant’s  license  tax  is  made. 

16. 

Capital— Tobacco  on  hand  in  this  State. 

Is  tobacco  which  a tobacco  company  has  on  hand  in  this  State 
for  purposes  of  manufacture  to  be  treated  as  tangible  personal 


Digest  of  Opinions. 


14-18 


property  under  Schedule  “B”,  or  should  it  be  returned  as  capital 
under  Schedule  “C”? 

Held: 

This  tobcaco  should  be  returned  as  capital. 

17. 

Capital  of  Corporation — where  listed — declaration  of  principal 
office  in  certificate  of  incorporation  of  domestic  corporation 
conclusive. 

Where  should  the  capital  of  a corporation  be  listed  for  taxa- 
tion? 

Held: 

The  capital  of  a corporation  should  be  listed  for  taxation  where 
its  principal  office  is  located.  The  declaration  in  the  certificate 
of  incorporation  of  the  principal  office  of  a domestic  corporation  is 
conclusive  as  to  this. 


18. 

Omitted  Tax  on  bonds — Defunct  corporation — to  whom  payable. 

About  thirty  years  ago  a telephone  company  was  formed 
which  operated  for  about  twenty-five  years.  In  1910  it  sold  all  of 
its  property  to  another  company,  a part  of  the  consideration  con- 
sisting of  bonds  issued  by  the  latter  company.  About  three  years 
ago  the  original  company  became  a defunct  corporation.  Sometime 
in  1914  or  1915  the  bonds  were  paid,  but  the  State  did  not  realize 
any  tax  on  these  bonds.  Question  is  as  to  whether  or  not  the  bonds 
are  assessable  for  omitted  taxes,  and  if  so,  in  whose  name? 

Held: 

These  bonds  are  assessable  to  the  person  by  whom  they  are 
held  on  the  first  day  of  February  prior  to  the  time  the  corporation 
went  out  of  existence. 


19-25 


The  State  Tax  Board . 


19. 

Judgments — report  of  examiners  of  records. 

Should  judgments  be  reported  for  taxation  by  Examiners  of 
Records? 

Held: 

They  should  be  reported. 


20. 

Omitted  taxes — report  local  board  receives — failure  to  appear — 
may  go  into  court — time  allowed  for  appeal. 

May  a taxpayer,  who  after  having  been  reported  to  a local 
board  of  review  for  omitted  taxes,  and  after  having  been  notified, 
fails  to  appear  before  the  local  board  of  review,  go  into  court  and 
show  that  the  taxes  are  not  properly  assessable  against  him? 

Held: 

The  taxpayer  may  go  into  court  and  show  that  the  taxes  are 
not  properly  assessable  against  him.  The  taxpayer  has  one  y$ar  in 
which  to  apply  to  the  court  for  the  correction  of  an  erroneous  as- 
sessment of  a license  tax,  and  two  years  in  which  to  apply  for  the 
correction  of  an  erroneous  assessment  of  a property  tax. 

21. 

Capital — Fishing  corporations — Surplus — Carried  over;  how  taxed. 

Is  the  surplus  carried  over  by  a fishing  corporation  from  one 
year  to  another,  and  not  distributed  to  its  stockholders  before  Feb- 
ruary 1st,  taxable  on  that  date  as  a part  of  its  capital? 

Held: 

Such  surplus  is  taxable  as  a part  of  the  capital. 

22. 

Income  tax — Exemptions — Deductions. 

Are  exemptions  allowed  on  income  to  a corporation  as  in  the 
case  of  individuals? 


Digest  of  Opinions. 


19-25 


Held: 

A corporation  is  subject  to  a tax  upon  its  income  just  as  an 
individual  is,  but  there  are  no  exemptions  in  the  case  of  a corpora- 
tion as  in  the  case  of  an  individual. 

23. 

Income  tax — Corporation  chartered  in  Virginia  doing  all  its  busi- 
ness in  another  State. 

Is  a corporation  chartered  in  Virginia  and  doing  all  of  its  busi- 
ness of  every  kind  in  another  State  subject  to  an  income  tax? 

Held: 

Such  a corporation  is  not  subject  to  an  income  tax. 

24. 

Income  tax — corporations  doing  business  in  another  State — hold 
meetings  in  Virginia. 

A corporation  chartered  in  Virginia  does  all  of  its  business  in 
another  State,  but  for  convenience  because  the  officers  of  the  corpo- 
ration live  here,  it  keeps  an  office  in  this  State  to  which  reports  of 
this  foreign  business  are  made  and  where  its  accounts  are  kept 
and  audited.  Is  the  income  of  this  corporation  taxable? 

Held: 

The  mere  holding  of  stockholders  meetings  in  this  State  by 
such  corporations  as  required  by  law  is  not  doing  business  in  this 
State,  and  their  income  is  not  taxable. 

25. 

License  Tax — Peddlers — Oil  Company — Sale  only  to  merchants. 

An  oil  company  maintains  in  a city  tanks  from  which  it  delivers 
oil  and  gasoline  to  its  regular  customers,  who  are  merchants  only. 
It  is  the  custom  of  the  company  to  have  its  wagons  make  a regular 
call  upon  these  merchants  and  sell  any  quantity  of  gasoline  or  oil 
needed.  Is  such  a company  guilty  of  peddling  when  there  was  no 
previous  order? 


26-30 


The  State  Tax  Board . 


Held: 

Such  a company  is  not  taxable  as  a peddler  if  it  sells  only  to 
retail  stores. 


26. 

License  Tax — Oil  Company — Order  Form. 

An  oil  company  has  a tank  in  a certain  city  from  which  it  fills 
its  wagons  used  in  delivering  oil  and  gasoline  to  its  customers;  the 
company  uses  an  order  form  which  its  customers  fill  out  and  which 
reads  as  follows: 

“B  Oil  Company 
(Incorporated  in  C) 

Please  deliver  to  me  gallons  of  oil  and 

gallons  of  gasoline,  and  have  your  wagon 

call  on  its  regular  trips,  delivering  as  much  oil  and 
gasoline  as  I may  need  at  the  time  of  the  call.  This 
is  to  be  a standing  order  until  you  are  notified  to  the 
contrary. 


After  the  form  is  filled  out  by  the  customer  the  wagon  stops  on 
regular  trips  and  fills  the  order,  which  the  company  holds  as  a con- 
tinuous order. 

Held: 

If  the  oil  company,  when  it  fills  previous  orders  for  gasoline  or 
oil,  at  the  same  time  delivers  more  gasoline  or  oil  than  was  origi- 
nally ordered,  it  cannot  be  held  to  be  guilty  of  peddling  without  a 
license.  But  if  the  oil  company  sells  from  its  wagons  gasoline  or 
oil  to  any  automobile  owner  or  other  persons  in  need  thereof  with- 
out previous  orders  therefor,  this  would  constitute  the  company  a 
peddler.  If  the  company  has  no  definite  place  of  business  and  does 
not  deliver  standing  orders,  it  is  taxable  as  a peddler,  but  if  it  has 
‘a  tank  or  warehouse  which  can  be  taken  as  a definite  place  of  busi- 
ness and  delivers  only  on  standing  orders  and  does  not  deliver  to 
irregular  takers  upon  the  street,  it  is  a merchant  and  should  be  re- 
quired to  take  out  a license  as  such. 


Digest  of  Opinions. 


26-30 


27. 

Income  tax — Gift  of  money. 

Under  our  income  tax  law  would  a taxpayer  be  required  tu 
include  as  income  sums  of  money  which  were  given  to  him  during 
the  year? 

Held: 

He  would  be  required  to  include  sums  of  money  given  him  as 
income. 

28. 

Capital — First  class  under  gross  assets — beginning  business. 

To  what  does  the  first  enumerated  class  under  gross  assets  in 
the  definition  of  capital  as  contained  in  detail  list  “2”  of  the  per- 
sonal interrogatory,  “The  money  realized  from  shares  of  stock  or 
money  adventured  in  business”  apply? 

Held: 

This  class  only  applies  to  corporations  or  persons  beginning 
business. 


29. 

Foreign  corporations — Tax  on  Capital  used  in  Virginia — situs. 

Are  foreign  corporations  with  plants  in  a certain  county  in 
Virginia  required  to  pay  a tax  upon  their  capital  used  or  employed 
in  that  county? 

Held: 

They  are  required  to  pay  a tax  upon  capital  used  in  that  county. 

30. 

Bonds  of  a town — Liability  for  Taxation. 

Bonds  of  a certain  town  are  held  by  A.  Are  these  bonds  ex- 
empt from  taxation? 


31-86 


The  State  Tax  Board. 


Held: 

The  locality  may  exempt  these  bonds  from  local  taxation,  but 
our  State  Constitution  requires  such  property  to  be  taxed  for  State 
purposes  and  the  law  has  also  specifically  provided  that  bonds  of 
coanties,  cities  and  towns  are  subject  to  State  taxation. 

31. 

Income  tax — United  States  Bonds — Gift  of. 

Should  United  States  bonds  be  returned  as  part  of  income? 

Held: 

A gift  of  United  States  bonds  is  not  taxable  as  income. 

32. 

Drugs  in  possession  of  physicians — taxability — under  what  section. 

Is  the  value  of  drugs  in  the  possession  of  a practicing  physician 
taxable  under  Schedule  “B”,  paragraph  22? 

Held: 

The  value  of  such  drugs  is  taxable  under  Schedule  “B”,  para- 
graph 22. 


33. 

Tax  Domicile  Intent  to  change  residence. 

A party  who  has  resided  in  the  State  of  Virginia  for  a good 
many  years  inherited  a few  years  ago  a considerable  estate  from 
her  father  who  lived  in  the  State  of  New  York.  She  still  main- 
tains her  home,  which  she  owns,  in  the  State  of  Virginia.  The 
Examiner  of  Records  called  upon  her  for  a report  of  her  intangibles, 
and  was  referred  by  her  to  her  attorney  in  New  York,  who  advised 
that  soon  after  her  father’s  death  she  decided  to  change  her  resi- 
dence to  the  State  of  New  York,  as  her  property  was  in  New  York, 
and  that  since  that  time  she  had  been  paying  taxes  in  the  State  of 
New  York.  Question  is,  whether  such  a decision  on  her  part  is 
sufficient  under  the  circumstances  to  relieve  her  from  the  payment 
of  taxes  tQ  the  State  of  Virginia. 


Digest  of  Opinions. 


31-36 


Held: 

The  party  cannot  acquire  a residence  in  New  York  by  bald  in- 
tent to  reside  there,  but  in  order  to  establish  a tax  domicile  there 
she  must  lose  her  domicile  in  Virginia.  To  establish  a domicile 
two  things  are  needed:  an  actual  residence,  habitation  or  home 
must  be  acquired,  and  the  party  acquiring  it  must  intend  to  remain 
there  permanently  or  for  an  indefinite  period  of  time.  In  this  cas% 
the  party  seems  to  have  the  intention  but  never  has  acquired  a 
habitation  or  home  in  New  York. 

34. 

Local  Boards  of  Review — Information  to  be  obtained  from  attorneys 
can  call  for  disclosures — money  loaned  for  clients. 

Can  Local  Boards  of  Review  call  on  attorneys  loaning  money 
for  their  clients  to  disclose  all  information  in  regard  thereto,  so 
that  said  property  may  be  made  subject  to  taxation? 

Held: 

Local  Boards  of  Review  can  call  for  such  information. 

35. 

Income  tax — State  and  National  Banks. 

Are  State  and  national  banks  subject  to  an  income  tax? 

Held: 

State  and  national  banks  are  not  subject  to  an  income  tax. 

36. 

License — Private  Banker— renewal  of  notes  by  merchant  does  not 
constitute. 

A merchant  accepts  from  his  customers  promissory  notes  of 
amounts  varying  from  $10  to  $50  payable  from  thirty  to  sixty  days. 
Upon  these  notes  he  makes  a charge  of  fifty  cents  when  any  of  them 
are  renewed,  or  refuses  to  renew  them  unless  this  fee  is  charged, 
claiming  that  the  bank  charges  him  this  amount.  It  does  not  appear 
whether  these  notes  are  taken  in  payment  of  merchandise  or  not, 


37-41 


The  State  Tax  Board. 


but  for  the  purpose  of  this  opinion  it  is  assumed  that  they  are  so 
taken.  The  notes  are  endorsed  for  collection  to  the  credit  of  the 
merchant  at  his  bank.  Should  he  be  required  to  pay  a license  tax 
as  a private  banker? 

Held: 

No  license  as  a private  banker  should  be  required  in  this  case. 

37. 

Income  Tax — Corporations — Principal  Office — Situs  of  for  taxation. 

Where  should  corporations  report  their  income  for  taxation? 

Held: 

A corporation  chartered  under  the  laws  of  this  State  should 
report  all  of  its  income  for  taxation  to  the  Commissioner  of  the 
Revenue  in  whose  district  its  principal  office  under  its  articles  of 
incorporation,  is  located;  a corporation  chartered  under  the  laws 
of  another  State  should  return  all  of  its  income  taxable  in  this 
State  to  the  Commissioner  of  the  Revenue  in  whose  district  its 
principal  office  is  located  by  the  certificate  of  authority  to  do  busi- 
ness in  this  State  issued  by  the  State  Corporation  Commission. 

38. 

Foreign  Corporation  Property — hides — used  by  Virginia  Corpora- 
tion— taxability. 

Hides  are  owned  by  a company  outside  of  the  State  but  are 
used  by  a corporation  in  Virginia  to  be  tanned  by  the  latter.  To 
whom  should  the  Hides  be  taxed? 

Held: 

Our  tax  system  requires  that  taxes  on  property  be  paid  by  the 
owner,  and  if  the  owner  be  a foreign  corporation,  such  tax  should 
be  assessed  to  it  and  paid  by  it. 

39. 

Capital— Cut  Timber  used  in  Business — real  estate  or  capital — 
lumber — relief. 

A in  1915,  sells  to  B a lot  of  standing  timber  located  upon  the 


Digest  of  Opinions. 


37-41 


land  of  A.  The  timber  is  assessed  to  B and  the  land  to  A.  B in 
1916,  pays  taxes  on  the  standing  timber  and  during  1916  cuts  the 
timber  and  stores  the  said  timber  after  cutting  it  for  use  in  his 
milling  business. 

Held: 

If  it  be  true  that  this  timber  on  February  1,  1917,  still  remains 
for  the  use  of  B in  his  business,  he  should  return  the  timber  as  a 
part  of  his  capital.  B is  given  a remedy  for  relief  from  assessment 
of  this  timber  as  real  estate,  by  applying  to  the  local  board  of  re- 
view of  the  county  and  asking  that  the  assessment  be  stricken  from 
the  land  books.  Such  relief  may  be  granted  at  any  time  prior  to 
February  1,  1917. 


40. 

Corporation — Situs  for  taxation — principal  office — provisions  of 
certificate. 

A manufacturing  corporation  has  its  principal  office  in  a city 
and  conducts  its  business  in  a county.  Should  it  be  taxed  where 
its  principal  office  is  located  or  in  the  counay  where  it  conducts  its 
business  ? 

Held: 

A corporation  is  to  be  taxed  on  its  intangibles,  including  capi- 
tal, at  its  principal  place  of  business  and  the  provision  in  its  cer- 
tificate of  incorporation  as  to  its  principal  place  of  business  is  con- 
clusive on  this  question. 

41. 

Capital — Deductions — Money  borrowed  to  pay  bill. 

A merchant  on  January  29,  1916,  owed  to  a seller  $5,000  for 
goods,  wares  and  merchandise  bought  by  him  of  the  seller,  and 
in  order  to  save  discount  he  borrowed  the  money  to  pay  the  bill, 
giving  their  note.  Question  is  as  to  whether  in  assessing  the  local 
capital  of  merchants  he  should  be  allowed  to  deduct  the  amount 
of  this  note? 


42-46 


The  State  Tax  Board . 


Held: 

In  assessing  the  local  capital  of  this  merchant  the  amount  of 
the  note  should  not  be  deducted. 


42. 

Intangible  property — Cattle— Held  by  executor  under  will. 

A,  testator  who  died  during  1915,  provided  by  will  that  his 
farm  should  not  be  partitioned  for  a certain  number  of  years,  and 
provided  that  his  son,  who  is  executor,  should  keep  the  farm  stocked 
with  grazing  cattle  during  those  years,  and  divide  the  profits  be- 
tween the  widow  and  another  son.  The  Examiner  of  Records 
charged  personal  property  as  intangible  property  this  year  against 
the  executor.  The  question  is  whether  the  cattle  should  be  charged 
as  intangible  or  tangible  property  next  year? 

Held: 

These  cattle  should  be  assessed  as  intangible  personal  property 
under  the  clause  of  the  will  providing  that  the  farm  should  be  kept 
stocked. 

43. 

License  Tax — Farmers’  Union — Buys  materials  for  members. 

A local  farmers’  branch  of  a chartered  organization  of  Vir-‘ 
ginia,  buys  fertilizers,  grass  seed  and  farm  implements  for  the  use 
of  its  individual  members.  Is  it  liable  for  the  merchants’  license 
tax? 

Held: 

This  union  is  not  liable  for  the  merchants’  license  tax,  as  it 
does  not  sell  aforesaid  materials  to  the  individual  members,  but 
acts  as  distributor,  and  does  not  buy  or  sell  anything  in  connection 
with  distribution.  A county  has  no  right  to  require  payment  of  a 
merchant’s  license  tax  in  this  case,*as  the  State  has  not  right  to  do  so. 

44. 

Deduction  from  income — shrinkage  in  value— real  estate. 


A loss  is  sustained  by  A in  the  sale  of  certain  real  estate  in 


Digest  of  Opinions. 


42-46 


1915,  which  had  been  purchased  in  1900,  by  property  depreciating 
in  value.  Is  there  any  deduction  allowed? 

Held: 

No  deduction  is  allowed  on  account  of  shrinkage  in  value  of 
the  original  property  or  capital  in  reporting  income. 

45. 

Capital — Excess  of  deductions  over  assests. 

The  amount  of  borrowed  money  and  other  deductions  are  in 
excess  of  the  net  assets  of  a business. 

Held: 

Under  definition  of  capital  as  contained  in  the  tax  laws,  “net 
assets”  is  ordinarily  the  taxable  capital,  but  when  the  amount  of 
borrowed  money  and  other  deductions  are  in  excess  of  the  net  assets, 
then  such  excess  shall  also  be  taxed  as  capital. 

46. 

Felled  timber  and  lumber — how  assessed — land  or  capital. 

Lumber  has  been  sawed  by  the  owner  of  land  and  is  in  his 
possession.  The  owner  operates  a sawmill.  How  is  this  lumber 
assessed? 

Held: 

As  long  as  the  timber  remains  in  the  possession  of  the  owner 
in  unchanged  form,  that  is  timber  felled  by  the  owner  of  land 
without  any  manufacturing  work  being  done  thereon,  when  the 
owner  pays  taxes  on  the  land  he  also  pays  taxes  on  the  timber, 
but  as  soon  as  this  timber  has  been  put  through  a sawmill  and  the 
form  changed  to  lumber  of  any  kind,  and  if  it  remains  on  hand  until 
the  first  of  February,  it  is  taxable  as  part  of  the  inventory  of  stock 
on  hand,  and  should  be  returned  as  capital  by  the  owner,  although 
he  is  also  the  owner  of  land.  The  law  contemplates  that  the  owner 
of  timber  lands  may  procure  a correction  of  his  assessment  after 
removal  of  the  timber. 


47-51 


The  State  Tax  Board. 


47. 

Foreign  corporation — Capital — Retains  title  to  raw  materials  used 
by  local  corporation — By  whom  reported. 

A corporation  operating  in  a city  owns  machinery  and  a plant 
and  employs  workmen  who  are  engaged  in  the  manufacture  of  raw 
silk  into  silk  thread.  Another  corporation  furnishes  to  this  corpo- 
ration  all  the  raw  silk,  retaining  title  thereto  during  the  process  of 
manufacture. 

Held: 

The  former  corporation  should  report  all  of  its  captal  for  taxa- 
tion, and  such  capital  should  embrace  all  accounts  receivable,  bills 
receivable,  machinery  and  tools  not  taxed  as  real  estate,  money  on 
hand  and  on  deposit;  but  stock  on  hand  is  not  subject  to  taxation. 
All  raw  materials  and  stock  on  hand  should  be  assessed  and  taxed  as 
tangible  personal  property  in  the  name  of  the  non-resident  corpo- 
ration owning  the  same. 


48. 

Merchant’s  license  tax  on  purchases — local  representatives  taking 
orders  for  suits. 

Merchants  in  a city  allow  representatives  of  clothing  houses 
to  take  orders  for  suits  of  clothes,  assisting  the  representatives  by 
taking  measurements  and  in  other  ways.  The  suits  are  afterwards 
sent  to  the  merchants  who  deliver  them  to  the  customers  and  then 
the  merchants  receive  the  money  and  send  it  to  the  clothing  houses 
receiving  therefor  a commission.  The  question  is  whether  this 
method  of  doing  business  is  one  that  would  require  a license,  or 
in  the  case  of  merchants  doing  other  mercantile  business,  whether 
they  money  received  from  such  business  would  have  to  be  reported 
as  purchases  ? 1 

Held: 

The  inerchant  is  not  required  to  take  out  a license  for  business 
of  this  kind,  and  therefore  does  not  have  to  report  the  purchase 
price  of  these  goods  in  making  up  his  purchases  as  required  by  law. 


Digest  of  Opinions. 


47-51 


49. 

Capital — held  by  trustee  as  guaranty — to  whom  taxed. 

A corporation  engaged  in  buying  and  selling  real  estate  be- 
comes a guarantor  in  a certain  matter,  and  in  order  to  provide 
funds  which  may  be  necessary  to  make  good  the  guarantee  takes 
money  which  is  a part  of  its  capital  and  places  the  same  in  the 
hands  of  a trustee  to  be  held  by  the  said  trustee  to  meet  such  lia- 
bility of  the  corporation  as  may  arise  by  reason  of  the  guarantee 
which  was  made.  This  transaction  is  not  a matter  of  public  record. 
The  corporation  reports  toNthe  Examiner  of  Records  the  amount 
involved  as  money  on  deposit,  and  not  as  capital. 

Held: 

This  money  should  be  taxed  as  capital  to  the  corporation. 

50. 

Taxability  Capital — Building  Contractor  who  pays  license  tax. 

Certain  capital  is  employed  in  their  business  by  building  con- 
tractors, who  also  pay  a specific  license  tax  based  on  the  volume 
of  work  done  by  them. 

Held: 

This  capital  is  taxable  as  such,  although  the  contractors  pay 
the  specific  license  tax  based  on  their  volume  of  business. 

51. 

Capital — Method  of  computation — Deductions  in  excess  of  gross 

assets. 

What  is  the  method  of  arriving  at  the  taxable  capital  of  one 
whose  deductions  are  in  excess  of  his  gross  assets? 

Held: 

Assume  man  has  gross  assets  of  $100,000  and  is  entitled  to  de- 
ductions amounting  to  $110,000.  The  excess  of  deductions  over 
net  assets  amounts  to  $110,000.  Assuming  the  party  is  still  actively 
engaged  in  business ; has  not  gone  into  the  hands  of  a receiver, 


52-55 


The  State  Tax  Board. 


made  assignment  or  been  adjudged  a bankrupt,  his  taxable  capital 
is  $110,000,  the  value  of  the  net  assets  in  this  case  being  nothing. 

52. 

Capitation  taxes — liability  of  war  veterans. 

Is  a person  liable  for  capitation  taxes  who  during  the  war  be- 
tween the  States  served  in  the  army  or  navy  of  the  United  States 
or  the  Confederate  States,  or  any  State  of  the  United  States  or  of 
the  Confederate  States? 

Held: 

Veterans  of  the  Civil  War  who  are  pensioned  by  this  State  for 
military  services  are  exempt  from  the  payment  of  poll  taxes;  vete- 
rans not  pensioned  are  liable  for  poll  taxes,  and  all  veterans  of  the 
late  war  between  the  States  may  vote,  other  requisites  being  present, 
whether  their  poll  taxes  have  been  paid  or  not. 

53. 

Merchant’s  license — Automobile  dealers — basis  of  purchases. 

What  is  the  liability  of  automobile  dealers  for  taxation  as  mer- 
chants on  the  basis  of  purchases? 

Held: 

Each  dealer  in  automobiles  must  pay  a license  fee  of  $50.00  re- 
quired under  section  3-b,  and  the  payment  of  a license  fee  re- 
quired under  section  3-a  will  not  relieve  him  of  this  liability.  A 
dealer  in  automobiles  or  other  motor  vehicles  who  keeps  a place 
for  the  sale  of  such  motor  vehicles  and  who  owns  the  machines  he 
sells  is  liable  for  the  merchant’s  license  tax,  based  on  the  purchases 
made  by  him,  under  section  45  of  the  Tax  Bill. 

54. 

License — Peddler — Steamboat  captain  v/ho  sells  barrels  and  ice. 

The  captain  of  a steamboat  that  makes  daily  stops  at  wharves 
in  a county  is  engaged  in  the  business  of  selling  empty  barrels  and 
ice  to  the  customers  who  meet  him  at  the  wharf  where  his  boat  stops 


Digest  of  Opinions. 


52-55 


and  where  the  entire  business  is  transacted.  This  party  is  engaged 
in  the  business  of  selling  the  aforesaid  barrels  and  ice  on  his  own 
account  and  will  sell  barrels  or  ice,  or  both,  to  any  person  desiring 
to  purchase  the  same.  Should  he  be  required  to  pay  a license  as  a 
peddler? 

Held: 

The  captain  should  be  considered  a peddler  and  required  to 
take  out  the  proper  license. 

55. 

Omitted  taxes — Real  estate — correction  of  assessment. 

A certain  corporation  is  charged  on  the  land  book  of  a county 
with  a tract  of  land  described  thereon  as  containing  20,000  acres, 
and  which  it  purchased  in  1910.  Within  the  generally  recognized 
boundaries  of  this  tract  of  land  are  a number  of  smaller  tracts 
aggregating  5,000  acres,  each  lying  within  its  own  definite  bound- 
aries and  each  claimed  by  some  individual  who  pays  taxes  on  it  and 
to  whom  it  is  charged  on  the  land  book.  In  June,  1916,  a commitiee 
of  citizens  of  the  county  called  the  attention  of  the  local  board  of 
review  to  the  alleged  fact  that  the  tract  of  land  charged  to  the 
corporation  actually  contained  considerably  more  than  20,000  acres, 
and  requested  the  board  to  make  such  a correction  of  the  assess- 
ment of  this  property  as  would  compel  the  corporation  to  pay  a 
proper  tax  on  its  holdings.  Accordingly  the  local  board  of  review 
employed  the  county  surveyor  of  the  county  to  ascertain  the  acre- 
age of  the  land  in  question,  which  he  now  reports  to  be  35,000  acres, 
inclusive  of  the  smaller  tracts  owned  by  individuals  as  mentioned 
above.  What  is  the  proper  procedure  on  these  facts,  and  liability 
of  the  corporation  for  back  taxes  on  so  much  of  the  said  land  as 
has  heretofore  been  omitted  from  the  land  book,  or  as  does  not 
now  appear  thereon? 

Held: 

The  commissioner  of  the  revenue  has  the  power  under  section 
479  of  the  Code  of  Virginia  to  make  the  proper  entry  and  assess- 
ment. This  case  can  be  handled  by  use  of  this  Code  section  and 
section  “M”  of  the  act  creating  the  Local  Board  of  Review.  The 


56-58 


The  State  Tax  Board. 


corporation  should  not  have  a greater  quantity  of  land  charged 
to  it  than  it  actually  owns.  If  the  entire  tract  contains  35,000 
acres,  of  which  5,000  acres  is  claimed  by  individuals  already  pay- 
ing taxes  thereon,  the  total  amount  charged  to  the  corporation 
should  be  30,000  acres.  If  there  is  a conflict  of  title  between  the 
corporation  and  the  individuals  as  to  the  5,000  acres  of  land,  the 
matter  is  to  be  settled  'by  the  circuit  court ; and  when  the  matter 
is  finally  adjudicated  the  proper  entry  can  be  made  on  the  land 
book. 

The  present  owner  of  this  real  estate  is  liable  for  taxation  on 
it  only  from  the  time  of  its  purchase.  See  Virginia  Constitution, 
section  174. 

56. 

Omitted  taxes — Stock— Holding  Corporation — How  assessed. 

A corporation,  whose  purpose  as  set  forth  in  its  charter  cer- 
tificate, is  “to  purchase  or  otherwise  acquire,  sell  dispose  of  and 
deal  in  real  estate  and  personal  property  of  all  kinds”  reports  to 
the  Commissioner  of  the  Revenue  for  the  year  1910  certain  shares 
of  stock  of  corporations  all  of  whose  capital  is  not  taxed  by  this 
State.  The  corporation  making  this  return  reports  the  value  of 
this  stock  at  $48,277.66,  and  the  Commissioner  of  the  Revenue  as- 
sesses it  at  that  figure.  This  valuation  is  known  by  the  corporation 
to  be  too  low  and  the  Commissioner  of  the  Revenue  has  no  means 
of  determining  the  true  valuation  or  actual  market  value,  which 
is,  as  a basis  of  the  valuation  given  to  the  Commissioner  of  the 
Revenue. 

In  1916  the  Examiner  of  Records,  acting  under  section  508  of 
the  Code  of  Virginia,  discovers  that  the  actual  market  value  of 
said  shares  of  stock  was  $59,912.66,  and  makes  an  assessment  of 
$11,635.00  as  omitted  property,  this  figure  being  the  difference  be- 
tween the  valuation  reported  to  the  Commissioner  of  the  Revenue 
as  of  February  1,  1910,  and  the  actual  market  value  as  of  that  date. 

Is  the  assessment  so  made  by  the  Examiner  of  Records  legal? 
Held: 


56-58 


Digest  of  Opinions . 

The  Examiner  of  Records  can  assess  for  omitted  taxes  the  dif- 
ference between  the  amount  returned  and  the  fair  market  value  of 
the  stock. 

57. 

Money  in  bank — held  by  guardian — how  assessed. 

Mrs.  A qualified  as  guardian  of  her  infant  child  in  February, 
1915,  and  a few  weeks  after  qualification  received  $2,500  on  an 
insurance  policy  for  the  benefit  of  her  infant  child.  This  money 
was  put  in  bank.  In  1915  this  money  was  assessed  as  money  in 
bank.  In  1916  it  was  reported  as  bonds.  A correction  was  asked 
by  the  attorneys  for  Mrs.  A,  claiming  that  $1,643  of  the  amount 
assessed  was  money  in  bank.  The  question  is,  whether  this  should 
be  assessed  as  bonds,  or  as  money  in  bank?' 

Held: 

The  money  in  the  hands  of  this  fiduciary  should  be  reported 
as  money  in  bank  and  not  as  bonds. 

58. 

Income — Building  and  Loan  Association — To  whom  assessed. 

A domestic  building  and  loan  association,  organized  on  the 
mutual  basis,  and  which  pays  a minimum  license  tax  to  the  State, 
has  its  principal  office  at  A.  Approximately  one-third  of  the  stock 
of  this  corporation  is  owned  by  residents  of  the  city  of  A,  one-third 
by  citizens  of  Virginia  living  outside  of  the  city  of  A,  and  the  re- 
maining one-third  by  persons  residing  without  the  State  of  Vir- 
ginia. The  income  of  the  association  for  the  past  year  was  $18,000, 
of  which  $15,000  was  distributed  among  the  stockholders  in  the 
form  of  dividends  and  $3,000  credited  to  surplus.  The  question  is 
as  to  the  liability  of  a building  and  loan  association,  organized  on 
the  mutual  basis,  for  an  income  tax  under  the  laws  of  Virginia. 
Held: 

This  corporation  is  liable  for  State  taxes  on  income,  but  per- 
sons who  own  stock  in  this  corporation  are  not  liable  for  State  taxes 
on  income  derived  from  same. 


59-62 


The  State  Tax  Board. 


59. 

Ancilliary  Executor — Extent  of  liability  for  taxes. 

A,  a resident  of  a county  in  New  York,  died  in  1898,  leaving 
surviving  him  a widow  and  two  children.  Under  his  will,  which 
was  duly  admitted  to  probate  in  New  York,  his  entire  estate  was 
left  to  his  wife  for  her  lifetime,  with  remainder  to  his  two  children. 
His  wife  was  appointed  executrix  and  qualified  in  New  York.  At 
the  time  of  his  death,  A owned  stock  in  various  non-Virginia  cor- 
porations, the  aggregate  value  of  which  stock  was  $12,980.  He  also 
owned  real  estate  in  a Virginia  county  valued  at  $4,000.  Neither 
A nor  his  wife,  or  either  of  their  children  has  ever  been  a resident 
of  the  State  of  Virginia,  nor  has  any  of  the  said  stock  been  within 
the  State  of  Virginia.  In  1914  the  real  estate  mentioned  was  sold, 
the  purchase  price  being  $4,000.  By  ancillary  proceedings  the  wife 
of  A qualified  as  executrix  under  the  said  will  in  the  Virginia  county 
and  took  into  her  hands  the  $4,000  which  was  the  purchase  price 
of  the  land  mentioned.  For  some  reason  not  understood  she  stated 
an  account  with  the  Commissioner  of  Accounts  of  the  Virginia 
county,  purporting  to  show  her  receipts  and  disbursements  as  such 
executrix,  but  in  this  account  no  mention  is  made  of  the  sum  of 
$4,000  received  from  the  sale  of  the  real  estate,  while  a complete 
inventory  of  the  stock  aggregating  $12,980  and  the  income  arising 
therefrom  was  included  in  the  account.  The  question  is  as  to  lia- 
bility of  the  executrix  for  taxes  assessed  on  the  stock  valued  at 
$12,980. 

Held: 

The  ancillary  executrix  who  qualified  in  Virginia  in  this  case 
is  only  liable  for  taxation  on  the  property  that  came  into  her  hands 
as  ancilliary  executrix  and  is  not  liable  for  taxation  in  Virginia  on 
the  stock  valued  at  $12,980. 


60. 

Increase  in  value  of  land — how  assessed. 


A taxpayer  buys  a tract  of  land  in  1912  for  $5,000  and  sells 
it  during  the  year  1916  for  $7,000.  Eliminating  all  questions  with 


59-62 


Digest  of  Opinions. 

regard  to  rent,  interest,  etc.,  what  is  the  profit  which  is  subject  to 
taxation  under  section  10,  clause  3 of  Schedule  “D”,  in  regard  to 
income  taxes? 

Held: 

The  difference  between  $5,000  at  which  the  property  was  bought 
in  1912  and  $7,000  at  which  it  was  sold  in  1916,  should  not  be  taxed 
as  income,  but  increase  in  capital  or  principal  money. 

61. 

Agricultural  production  in  hands  of  a purchaser — dairy  farm — pro- 
ceeds how  taxed. 

Under  Schedule  “B”,  section  6,  sub-section  15,  is  there  any 
tax  on  the  value  of  milk,  where  a man  has  and  maintains  a 
herd  of  cattle  for  the  purpose  of  producing  and  selling  milk 
and  supposing  that  the  land  on  which  the  herd  is  maintained  is 
not  cultivated  for  them,  beyond  the  grass  it  produces,  and  the  feed 
supplied  to  them  from  other  sources  is  not  raised  on  the  land  but 
bought;  in  other  words,  it  is  generally  known  as  a dairy  farm. 
Question  is  as  to  whether  or  not  the  milk  is  an  agricultural  produc- 
tion within  the  meaning  of  sub-section  15,  referred  to  above. 

Held: 

In  order  to  be  taxed  under  this  section  the  property  must  be 
in  the  hands  of  a purchaser. 


62. 

Note  secured  by  deed  of  trust — assignment — to  whom  taxed. 

B executes  a note  for  $1,000  dated  August  1,  1915,  payable  to 
A and  secured  by  a deed  of  trust  on  real  estate;  the  amount  rep- 
resents the  purchase  price  of  this  real  estate  purchased  by  B from 
A.  On  August  1,  1915,  A assigns  this  note  to  C,  and  C is  the  holder 
thereof  on  February  1,  1916.  The  deed  of  trust  securing  this  note 
is  duly  admitted  to  record  and  is  of  record  on  February  1,  1916, 
though  there  is  no  entry  to  show  who  is  the  holder  thereof.  The 
Examiner  of  Records,  relying  on  the  record  of  this  deed  of  trust, 
reports  this  note  for  assessment  against  A and  the  assessment  is 


63-67 


The  State  Tax  Board. 


duly  made  by  the  Commissioner  of  Revenue.  How  should  the 
proper  tax  on  this  note  be  assessed  and  collected? 

Held: 

From  the  statement  of  facts  it  is  clear  that  C and  not  A was 
the  holder  of  the  note  on  February  1,  1916.  This  is  sufficient  to 
make  it  clear  that  the  taxes  on  this  note  should  be  paid  by  C and 
not  by  A;  also  that  the  assessment  as  against  A is  erroneous,  and 
A is  entitled  to  relief.  Further,  as  a matter  of  law,  no  correct  as- 
sessment of  taxes  on  this  note  has  been  made.  C should  have  re- 
ported it  for  taxation  in  1916.  Not  having  done  so  he  is  liable  for 
taxes  on  it  still  as  omitted  property,  and  it  should  be  reported  and 
assessed  against  him  in  1917.  This  applies  provided  C is  not  a 
bank;  if  C is  a bank  no  assessment  should  have  been  made,  and 
none  is  proper  now. 


63. 

Local  Board  of  Review — increase  or  decrease  in  assessment — time 

limit. 

What  is  meant  by  the  expression  ‘ ‘ within  60  days  after  the 
books  have  been  completed  by  the  Commissioner  of  the  Revenue, 
etc.,  the  Local  Board  of  Review  may  increase  or  decrease  assess- 
ment, etc.”? 

Held: 

The  terms  of  this  statute  set  a definite  time  limit  of  60  days 
within  which  the  Local  Board  of  Review  may  be  requested  to  in- 
crease or  decrease  assessments.  The  “may”  simply  puts  it  in  their 
discretion  whether  to  act  or  not  within  that  time. 

64. 

Fiduciaries — funds  in  the  hands  of — distribution  made  prior  to 
February  1st. 

Is  the  statute  taxing  funds  in  the  hands  of  fiduciaries  as  of 
February  1st  following  the  qualification,  constitutional,  when  dis- 
tribution is  made  prior  to  the  following  February  1st?  A dies  June 


Digest  of  Opinions. 


63-67 


1,  1917,  B qualifies  June  30,  1917,  and  settles  his  accounts  and  makes 
distribution  before  February  1,  1918. 

Held: 

The  question  of  constitutionality  is  not  one  that  can  be  passed 
on  by  the  State  Tax  Board,  but  the  statute  must  be  followed  by  the 
State’s  tax  officers,  and  must  be  tested  out  in  the  courts  when 
raised.  The  terms  of  the  law  make  it  plain  that  the  fiduciary  in 
the  above  case  should  retain  the  amount  of  taxes  out  of  the  estate. 

65. 

Drug  store  that  sells  soda  water,  etc. — merchant’s  license. 

Should  the  amount  invested  in  soda  water,  cigars,  etc.,  sold  by 
a drug  store  be  taxed  as  capital,  or  should  the  merchant’s  license 
be  imposed  on  entire  purchases? 

Held: 

The  merchant’s  license  should  be  imposed  on  entire  purchsaes, 
in  accordance  with  the  terms  of  section  45,  page  62,  Tax  Laws. 

66. 

Omitted  taxes — estate  closed  by  administrator  or  executor. 

A certain  estate  is  held  by  the  administrator  or  executor.  In- 
ventory shows  party  or  parties  had  not  listed  with  commissioner  or 
examiner  as  much  as  inventory  shows.  How  to  proceed  ? 

Held: 

An  assessment  for  omitted  property  can  be  made  on  the 
above  statement  of  facts,  under  section  508  of  the  Code.  The 
omitted  taxes  should  be  assessed  to  the  executor  or  administrator. 

67. 

Information  that  can  be  required  by  examiners  or  boards  of  review 

Building  association  that  borrows  money. 

A building  association  has  borrowed  large  sums  from  various 
individuals  and  gives  its  notes  to  the  lenders.  Can  the  building 
association  be  required  to  furnish  a list  of  those  persons  who  have 
loaned  it  money,  to  the  examiner? 


68-70 


The  State  Tax  Board. 


Held: 

The  Examiner  of  Records  does  not  have  authority  to  require 
this  information  to  be  furnished,  but  the  Local  Board  of  Review 
is  given  authority  to  require  information  of  this  character  under 
sub-section  “f”  of  section  7 of  the  act  creating  the  State  Tax  Board 
and  the  Local  Boards  of  Review. 

68. 

Taxability  of  remainder  in  fund  in  hands  of  fiduciary — that  is  left 
as  life  estate  to  one  with  remainder  to  others — Does 
not  come  under  control  of  fiduciary. 

A died  intestate  and  owning  a piece  of  real  estate  in  the  city 
of  Roanoke.  Surviving  him  were  a widow,  Mrs.  A.  and  two  daugh- 
ters, B.  and  C.  Subsequently  these  two  heirs  executed  a joint  deed 
conveying  to  their  mother  a life  estate  in  the  land  mentioned.  In 
September,  1916,  all  parties  interested  joined  in  a deed  conveying 
this  property.  The  net  proceeds  of  this  sale  amounting  to  $16,934 
were  deposited  in  bank  in  Roanoke  with  the  understanding  that 
the  interest  accruing  on  this  deposit  should  be  paid  annually  to 
Mrs.  A during  her  life.  Mrs.  A died  in  January,  1917,  and  the 
money  was  withdrawn  from  the  bank  and  divided  between  the 
heirs.  B and  C qualified  as  administratrices  of  the  estate  of  their 
mother. 

The  question  is  as  to  the  liability  of  this  fund  for  taxation  in 
the  hands  of  B and  C in  their  fiduciary  capacity,  the  estate  to  be 
settled  within  twelve  months  from  the  date  of  their  qualification. 

Held: 

This  fund  of  $16,934  became  the  joint  property  of  the  heirs 
of  A immediately  upon  the  death  of  Mrs.  A,  and  in  no  way  properly 
came  under  the  control  of  B or  C in  their  fiduciary  capacity.  This 
fund  therefore  is  not  assessable  for  taxes  in  their  hands. 


Digest  of  Opinions. 


68-70 


69. 

Bank  refuses  to  furnish  information  to  examiner  of  record* — how 
proceeded  against. 

A bank  located  in  a certain  circuit  refuses  to  furnish  the  Ex- 
aminer of  Records  with  the  information  required  under  section 
3326-a  of  the  Code,  described  on  page  152  of  the  Tax  Laws  as  sub- 
section 4,  which  reads  as  follows : 

* * * “Any  bank,  banking-house,  corporation  or 
person  holding  money  or  evidences  of  debt  or  personal 
property  of  any  kind  under  the  control  of  any  court 
or  to  the  credit  of  any  cause  pending  in  said  court  or 
to  the  credit  of  any  receiver,  commissioner,  or  fiduci- 
ary shall  upon  application  furnish  the  examiner  of 
records  with  a statement  or  list  thereof,  and  any  bank, 
banking-house,  corporation,  or  person  refusing  such 
a statement  or  list  or  failing  to  furnish  the  same  shall 
be  liable  to  a fine  of  not  less  than  ten  dollars  nor  more 
than  twenty-five  dollars  for  each  day’s  failure  to  fur- 
nish the  same  after  five  days’  notice  to  do  so.  * * * 

What  procedure  is  to  be  followed  to  collect  the  fine  provided 
for  therein? 

Held: 

Criminal  proceedings  can  be  taken  under  section  9 of  an  act 
approved  March  17,  1916,  found  on  page  1040  of  the  fourth  volume 
of  Pollard’s  Code  of  Virginia.  The  procedure  will  be  governed  by 
section  712  of  the  Code  of  Virginia,  found  on  page  349  of  the  first 
volume  of  Pollard’s  Code. 


70. 

Administrator’s  personal  liability  for  taxes  when  he  neglects  to 
retain  same  out  of  estate — how  proceeded  against. 

A dies  on  March  1,  1916;  B qualifies  as  administrator  of  the 
personal  estate  of  the  decedent  on  April  1,  1916;  B then  proceeds 


71-72 


The  State  Tax  Board. 


to  distribute  the  entire  estate  and  make  ex  parte  settlement  before 
the  Commissioner  of  Accounts  of  the  county  in  which  he  is  quali- 
fied, which  account  of  receipts  and  disbursements,  such  as  is  re- 
quired by  the  statute,  is  confirmed  (by  the  expiration  of  the  statu- 
tory period)  on  October  1,  1916.  B has  failed  to  retain  any  funds 
out  of  this  estate  with  which  to  pay  the  taxes  due  the  Common- 
wealth thereon.  The  question  now  is  as  to  B’s  personal  liability 
for  such  taxes. 

Held: 

B,  the  administrator,  should  be  held  personally  liable  for  this 
tax.  The  Attorney  for  the  Commonwealth  should  proceed  against 
the  administrator  by  a suit  in  equity  for  the  recovery  of  the  taxes 
that  should  have  been  paid. 

71. 

Omitted  merchant’s  license  tax — penalty  of  5%  to  be  imposed. 

Should  a penalty  of  5%  be  imposed  on  omitted  merchant’s 
license  taxes  assessed  under  section  508  of  the  Code,  as  amended, 
the  license  being  that  of  an  ordinary  merchant  referred  to  in  sec- 
tion 46  of  the  Tax  Bill  ? 

Held: 

A penalty  of  5%  should  be  imposed  under  section  603  of  the 
Code  in  the  case  of  an  omitted  merchant’s  license  tax,  the  same 
being  a State  tax. 

72. 

Capital — deposit  of  grain  received  by  a flour  manufacturer  taxable 
as  such  when  he  mingles  it  with  his  own. 

A large  manufacturer  of  flour  conducts  the  greater  portion  of 
his  business  in  this  way:  He  receives  his  customers’  grain  as  a 
deposit,  and  enters  into  a contract  with  said  customer  to  deliver 
to  him  the  same  amount  of  grain,  or  the  product  of  the  amount  of 
grain,  at  any  time  the  customer  may  call  for  it,  receiving  as  his 
compensation  a certain  toll.  He  mingles  this  wheat  thus  on  deposit 
with  the  wheat  he  purchases  outright,  and  grinds  it,  and  sells  the 


Digest  of  Opinions. 


71-72 


product.  Is  the  grain  thus  used,  or  the  products  therefrom,  a part 
of  his  capital?  In  other  words,  he  handles  the  grain  just  as  a 
banker  handles  the  deposits  of  his  customer,  using  the  wheat  to 
manufacture  flour  which  he  sells,  but  always  retaining  enough  of 
grain  and  flour  to  meet  the  demands  of  his  depositors. 

Held: 

The  contract  made  by  this  manufacturer  with  persons  deliver- 
ing grain  to  him  is  a sale  and  not  a bailment,  and  such  grain  (or 
the  products  thereof)  taxable  as  capital  under  the  definition  of 
capital  found  on  page  18  of  the  Virginia  Tax  Laws. 


